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Block and Circle square cross-border remittances

Sep 28, 2022
Illustration of two hands held out with a coin glowing between them.

Illustration: Aïda Amer/Axios

TBD, the one-year-old division of Block that CEO Jack Dorsey once said would "likely be our most important contribution to the internet," is partnering with Circle to work on cross-border remittances, the duo announced Wednesday.

Why it matters: Block doesn't see this as a money maker, but it does believe the future is decentralized and that being part of the foundation will give the company a major leg forward in the decades to come.

Details: TBD and Block intend to launch their self-custody wallet and remittances service for the U.S.-Mexico corridor sometime later this year, says Emily Chiu, co-founder of TBD.

  • Built on top of TBD's open-sourced protocol, Chiu dubs the remittances offering as a "reference implementation." It lets developers and financial institutions see what is possible on the network, and attract them to build on top.
  • The remittances product will link to anyone who has a Mexican bank account.
  • The plan is to keep the remittance fees "cost neutral," likely putting it below the 4% average charged last year by Mexic0-facing remittance services.
  • "The bigger picture is showing, through our product pilot, how this infrastructure can be used especially in hard compliance situations," says Chiu. "We're really thinking about how do we abstract away the hard problems around solving for identity compliance and bridging to the legacy and Fiat world."

Background: Though Chiu dubs this a pilot, the problem facing TBD is far from small. The U.S. to Mexico market alone is enormous. Remittances to Mexico rose 27.1% last year to $51.6 billion — the vast majority of which came from the U.S.

  • Remittances are considered one of the most promising crypto use-cases, given the often punishingly high fees on the service and the volatility of some emerging market currencies that make it preferable to hold bitcoin, at times.

The bigger picture: "For us, monetization comes later," says Chiu. "It's after this new payment system is in place, it's after the new decentralized identity layer exists."

  • Chiu also sees potential services around reversing fraudulent payments or thefts — a difficult problem to resolve given the immutability of the blockchain.

The intrigue: Block CEO Dorsey is a bitcoin maximalist, having said bitcoin will be the only currency in the future. The primary focus of TBD itself, when first announced 2021, was also bitcoin, according to Dorsey.

  • However, Circle's stablecoin is not based on bitcoin — though it is notably less volatile -- leading to its popularity in companies currently testing out crypto payments.
  • "For us, crypto isn't very meaningful if it can't solve real problems for real people," says Chiu. "Stablecoins can provide a really critical bridge, because we're not yet in a world that's 100%, crypto."

Of note: The partners are planning to mint new USDC rather than buying the stablecoin off the open market, meaning if the project reaches scale, it'll also boost Circle's total circulation.

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